GLOBALIZATION
WHAT DOES IT MEAN TO GLOBALIZE THE
ECONOMY?
Comparative and Absolute Advantage
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A country has an absolute advantage when it has
the ability to produce more of a given product
using a given amount of resources.
A country has a comparative advantage in the
product that it can produce most efficiently given all
the products it could choose to produce.
Is it possible to have an absolute advantage, but
not a comparative advantage in producing a type
of product or service?
Reasons for Trade
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Joe Mauer may be the best quarterback in
Minnesota.
If Joe Mauer had an absolute advantage in
football and baseball, why did he choose to play
baseball only?
Tiger Woods example.
Reasons for trade?
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Law of Comparative Advantage- A nation is
better off when it produces goods and services for
which it has a comparative advantage. Each nation
can then use the money it earns selling those goods
to buy other goods that it cannot produce as
efficiently.
Which products/services do you think it makes sense
for the United States to produce?
Which might we want to trade for?
How Can Nations and People Resist
Free Trade?
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Protectionism- the use of trade barriers to protect a
nations industries from foreign competition.
Tariffs- a tax on imported goods
What effect would this have on the price of imported
goods?
 How would this effect the demand for imported products?
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Subsidies-a government payment that supports a
business, market or industry.
How might subsidies effect products price?
 How do subsidies effect the demand for products?
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Buy American
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“Buy American”- push for protectionist policies in
order to increase need for American production.
 The
idea is that this would create jobs for working class
Americans and preserve industries vital to our national
security and well being as a county.
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Give arguments for and against this theory.
Do you believe we should have had “Buy American”
provisions in our stimulus package? Explain your
answer.
Possible drawbacks of Protectionist
Behavior
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Trade War- a cycle of increasing trade restrictions
Increased prices for foreign goods- most things are
made with some foreign parts! Example Ipod
Decrease in competition reduces incentive for
domestic producers to become more efficient, thus
resulting in potential higher prices for domestic
goods.
Buy American (led by consumers)
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“Buy American” Using Consumer Sovereignty- As
consumers we have consumer sovereignty. If there is
no demand for imported products, businesses will
stop importing them and turn to products produced
in the US. Some believe this could increase
employment opportunities in the US. Do you agree
with this theory? Why or why not?
What does the article and the Ipod video indicate
about the prospects of “Buying American”?
Arguments for Free Trade
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Trade benefits both countries and allows them to
specialize in what they do best.
Increases efficiency and competition resulting in lower
prices for consumers.
Increased choice for consumers.
Protectionist policies may start trade wars which limit
opportunity for other industries and lead to higher
prices for consumers.
Greater interdependence of nation states leads to
reduction of likelihood of war between nation states
Argument Against Global Trade
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Increased flow of skilled and non-skilled jobs from
developed countries to developing nations.
(Wal-Mart)
Race to the bottom- Business will look to take their
production to places where there are little if any
labor laws and extremely cheap labor.
(Wal-Mart Video)
Spread of a Materialistic lifestyle and attitude that
sees consumption as the path to prosperity.
(Americanization)
Arguments Against Global Trade
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Eliminates cultural identity (Mcdonaldization)
Decreases in environmental integrity as polluting
corporations take advantage of a lack of
environmental protections in developing countries
(Environment Race to the Bottom).
Protect National Security- Steel, Agriculture etc…
Globalization
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In groups brainstorm answers to the following
questions
What makes a country attractive to business in a
globalized world?
Put a plus next to positive characteristics that we
posses as a country. Place a negative symbol next
to traits that we do not have.
In which types of jobs do we possess a comparative
advantage?
 Where
do we not?
Globalization (Are We Ready?)
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During the video answer the following question in your
notebooks.
Are we ready to compete in a global economy?
Are we doing all we can to maintain our comparative
advantage? Why or why not?
What can we do to improve and maintain our
comparative advantage?
 What
actions need to be taken by
 Government-
 Schools Individuals-
The World is Flat
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Summarize the summary
 Key
points (Things we should discuss)
 Summary will be turned in for credit
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Highlight vocabulary or concepts you don’t
understand (Things you would like to ask a question
about)
 Also
will be turned in for credit
Globalization and Business
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What could we do to make our country more
attractive to business?
As an individual, what can you do to make yourself
a more valuable or marketable asset to potential
employers (How can you stand out in a “flatter”
globalized world)?
GROSS
DOMESTIC
PRODUCT
(GDP)
Gross Domestic Product (GDP)
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The dollar value of all final goods and services
produced within a country’s borders in a given year.
Dollar value= selling price
Final Goods and Services=Form sold to consumers.
Produced Within a Country’s Borders=Cars made in
Ohio by a Japanese car company included. Cars
produced in another country by US car company not
included. This is important due to multinational
companies existence.
Within a given year= Only things produced that year
count. Example-house
Real vs Nominal GDP
How much did a candy bar cost 50 years ago?
 Real GDP= measured in constant or unchanging prices.
 Nominal GDP= GDP measured in current Prices
 Why would it be difficult to measure economic growth
from year to year using nominal GDP?
Per Capita GDP= GDP divided by total population.
 Why is this an important measurement to measure a
country’s standard of living? What does it not tell you?
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